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Going by the Zacks model, companies holding a Zacks Rank #5 have strong chances of performing worse than the broader market. Hence, investors seeking exposure to electrical machinery manufacturers are advised to avoid investing in or to sell their existing holdings in Axcelis Technologies.

Why the Downgrade?

Market sentiments have been weak since Axcelis Technologies reported its fourth-quarter and 2013 results on Feb 4, 2014. Since then, the share price of the company has fallen 5.4%. A snapshot of the company’s fourth-quarter and 2013 results is provided below:

Earnings per share in the quarter were 1 cent, in line with the Zacks Consensus Estimate, while revenues increased 31% year over year to $58.6 million. For 2013, the company reported a loss per share of 16 cents. Revenues generated were $195.6 million, down 3.8% year over year.

Fourth-quarter and 2013 results triggered downward revisions in earnings estimates for Axcelis Technologies. In the last 60 days, the Zacks Consensus Estimate for earnings per share has decreased 45.8% to 13 cents for 2014. The estimate for 2015 is pegged at 25 cents.

This, along with the negative average earnings surprise of 6.7% for the trailing 4 quarters, raises concern over Axcelis Technologies’ performance in the quarters ahead.

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